The European Financial Stability Facility (EFSF) on Tuesday expressed hope that the Euro area’s bailout fund, the European Stability Mechanism (ESM), will get approval from a German court.
Last month, the German court said the decision on the bailout fund and a fiscal pact proposed by Euro leaders to deal with the sovereign debt crisis, will be announced on September 12, a verdict that will be watched closely around Europe as the fund could not be launched without German approval. Germany is the largest economy in Euro zone.
The proposed ESM is an international organisation which will provide financial assistance to Euro zone members having financial difficulties. ESM, proposed to be based in Luxembourg, will replace temporary funding programmes such as EFSF and the European Financial Stabilisation Mechanism (EFSM).
Klaus Regling, chief executive officer of EFSF, said here on Tuesday the court striking down the proposal was very unlikely. “We have no such plan B if such an event occurs, because there is very little probability that this will occur.”
ESM, which would boost the firewall against the debt crisis to ^700 billion, was originally to come into effect on July 1.
The German court will rule on complaints from academics and lawmakers from Chancellor Angela Merkel's own coalition that ESM and the fiscal pact violated German law by taking away responsibility for the budget from Parliament.
Regling said the German Parliament had already ratified the move to set up a permanent euro rescue fund.
Delivering a speech on The Euro and the Future of Europe, he said the European adjustment regime was delivering results and several institutional gaps were being bridged. He cited the Euro area where fiscal deficit came down from six per cent from 2009-10 to four per cent now, which is half of the US and Japan. He expected that by next year, the region’s fiscal deficit would fall below three per cent.
“Europe is moving in the right direction to safe guard the Euro. We have both the means and the resources to deliver,” Regling added.